Should Illinois give ADM that tax break? You bet

As Illinois struggles to pay its bills and local governments continue to face steep budget gaps, people must question why these stewards of our tax dollars would consider tax breaks for multinational corporations in search of a new headquarters. Why do companies like Archer Daniels Midland Co. ask for such tax breaks in the first place?

For many reasons. First, they have an obligation to their shareholders to make decisions that are in the best financial interest of the company. Tax breaks improve the bottom line. Companies also have an obligation to their employees to pursue strategies that ensure the long-term viability and success of the company. Illinois is an expensive place to do business. We have some of the highest corporate tax rates, workers' comp premiums and sales tax rates in the country. Companies seek these corporate tax breaks in fulfillment of these obligations — to offset the high cost of doing business in Illinois compared with other states.

A company that does not seek the benefits of existing economic development programs arguably is not meeting its basic corporate obligations.

Illinois governments give these tax breaks for many reasons, too. Officials want to show that Illinois is business-friendly and to keep the jobs — and the economic activity and taxes that come with them — in Illinois. Self-preservation also comes into play: No official wants to be known as the politician who let a large corporation get away on his or her watch.

Finally, and perhaps most important, other states will pull out all the stops to lure a company away. As someone who represents companies in multistate site-selection efforts, I continue to see the lengths other states will go to attract a major corporate headquarters out from Illinois.

IT'S ABOUT REPUTATION

ADM is just one of the latest companies seeking tax breaks to keep their corporate headquarters here. While officials should always do a return on investment analysis, in ADM's case, it seems like a good bet for Illinois. The economic impact of ADM's corporate headquarters in Illinois probably far exceeds the company's reported ask of $24 million in tax breaks. Other states are most likely offering far more. Consider the economic impact of the company and high-level executives and support staff on an Illinois city: They will spend their money consuming the services of Illinois businesses. Their vendors and clients who come to Illinois will do the same.

Second, the reputational benefit to the state of having the headquarters of another major, multinational corporation is immeasurable. Does Illinois want to risk seeing all that activity somewhere else? Third, keeping ADM's headquarters in Illinois lessens the likelihood of other non-headquarters jobs migrating out of state. Once a company relocates its corporate headquarters, it may start to think about relocating other units as well.

Companies will always look to where they have the best chance of success. If a relatively small amount of tax breaks is what it takes to make companies like ADM think they will succeed in Illinois, then those tax breaks are a wise investment given the state's return.